You have a choice on how to sell your home—utilize the professional services of a real estate agent, or sell independently as For Sale by Owner (FSBO) to save money on commission costs. During the real estate boom of the late 90s and early 2000s, this was a common way to sell a home. Due to subprime and predatory lending at the time, the buyer pool had overheated, leading to an inventory shortage. As a result, sellers were in the driver’s seat, and the onslaught of FSBOs and uptick of discount brokers (who only charged a 1 percent commission) popped up on the national landscape. However, when the market crashed in 2008, FSBOs faded into the background, as did most discount brokers. In 2021, between 10 percent of home sales were as an FSBO. So, before going at it alone, consider the following.
Regardless of why you decided to sell your home, you likely still have an emotional attachment. As a result, it can be difficult to price it objectively compared to a third-party professional—a real estate agent. And although you may feel your pricing strategy is spot on, it may, in fact, not yield you as much money as you think it will.
FSBOs profit less money
One of the most important and effective tools for pricing your home is to have a professionally constructed Comparative Market Analysis (CMA)—a comprehensive report about your area’s current market and thus your home’s current value. Without one, it can be very complicated to price your home for fair market value and net the maximum amount of money. In addition, FSBOs cannot benefit from this information since only real estate agents have access to this platform which is generated through the Multiple Listing Service (MLS).
According to the National Association of REALTORS, in 2021, the median sold price for an FSBO was $225,000. In contrast, a realtor-assisted sale averaged $330,000—that’s more than a 46 percent increase. Additionally, FSBOs rarely attract their own buyers; therefore, be prepared to work with the buyer’s agent and pay a 2 to 3 percent commission. Furthermore, buyers tend to look for discounts on FSBO listings, increasing the likelihood of lowball offers.
Marketing your home can be challenging as your resources generally won’t have the same reach and effectiveness as the tools available to real estate agents. Where a real estate agent will create a comprehensive marketing plan to reach a more significant portion of the population, you will be tasked with writing the description, taking, and uploading enticing photos of your home, and creating a digital marketing campaign. That can be a lot for one person, and your ability to attract a ready, willing, and able buyer can be limited unless you purchase and utilize the latest marketing technology.
Buyers are typically vetted in advance by their real estate agent before they will take them on as a client. However, as an FSBO, you may not have the luxury of this process. So before doing it on your own, consider the possibility that you may have to protect yourself from scammers or other ill-intentioned people who tour your home; something to consider before doing it on your own.
Financing, contracts, and negotiating
Some of the most challenging aspects of selling your home are knowing if the buyer is qualified to purchase your home; determining if they are working with a reputable lender; figuring out if you have the appropriate resources to draw up a purchase agreement so you are fairly represented, and keeping track of your transaction to ensure that all contract dates are adhered to. In addition, negotiations do not end at the sales price. In addition, home inspection requests, closing credits, seller’s concessions, possible date extensions, and down payment amounts are also items you may need to navigate.
Although it may seem that listing your home as an FSBO can save you money, the reality is that, for most, this is not the case. So before deciding to go through this process alone, consider speaking to a real estate agent.